It’s all over the news: Britain is in the midst of a housing crisis.
An ever-increasing number of people are being locked out of the property market due to extremely high house prices. All political parties are blaming each other for causing the current desperate housing situation, whilst in the same breath intimating that only they can help get Britain out of this situation. Labour, for instance recently announced that by looking into the causes of the decline of homeownership, they will be able to build an additional 100,000 every year by 2020.
So what has actually caused the current state of the British housing market?
Since 1980 house prices have continuously grown by almost 7% annually. However, since the financial crisis in 2007, these have experienced a sharp decline which was accompanied by a fall in mortgages being taken out due to restricted post-crash lending criteria. As a result, the amount of deposits required from first-time buyers have shot up, making it harder for the younger generation to afford to purchase their own home. This phenomenon generally has been branded Generation Rent by the media.
But this is not the only reason for the increasing decline in homeownership: Since 1980 the number of households has skyrocketed, as nowadays there tends to be a lot more single person households then 30 years ago. The growing number of British households has caused an immense upsurge in demand for housing – so much so that the current 27million+ available properties in the UK still fail to supply the nation with enough affordable housing stock.
Last year’s annual housing survey by the Department of Communities and Local Government showed that the level of homeownership in the UK is currently at its lowest rate in about 30 years, as it fell from 65.2% to 63.3% in the year to 2014. Their data reveals that it is particularly younger people (25-34) that experienced a sharp drop in homeownership from 59% owning a home down to 36% in 2014.
Property consultancy Savills estimates that by the end of 2019 there will be a total of 6 million people in the private rented sector. Additionally they estimate that under 35s owner-occupiers will drop by 12% down to a total of 16%. During the same time 16-24 year olds are seeing a decline in homeownership, as more and more are renting (almost 91%).
So yes, there is indeed a downwards trend of homeownership across the country. The British population is required to be increasingly flexible in terms of their job location, having to be able to move on a moment’s notice. It is no surprise then that rental accommodation is on the rise, while the number of home owners is declining. However, the growing number of renters amongst the younger working population is not only due to them being priced out of the property market, but also because these young professionals increasingly favour flexible tenure options in central cities such as London, Manchester or Leeds instead of paying the sky-high prices associated with purchasing their own home.
So overall, if the newer generations seem to prefer the advantages of renting their home instead of buying it, is a decline in homeownership really as negative as made out by media?